«GLOSSARY OF TERMS The following Glossary of Terms is not intended to be legal definitions, but rather a lay expression or explanation of how the ...»
REAL ESTATE LAW: The law that affects the licensing and conduct of real estate agents.
REAL ESTATE OWNED (REO): A term used by lenders to refer to properties acquired through foreclosure.
REALITY OF CONSENT: A contract that complies with all of the basic requirements may still be either void or voidable. This is because of the doctrine of reality of consent. A contract must be entered into as the free and voluntary act of each party. Each party must be able to make a prudent and knowledgeable decision without undue influence. A mistake, misrepresentation, fraud, undue influence or duress would deprive a person of that ability. If any of these circumstances is present, the contract is voidable by the injured party. If the other party were to sue for breach, the injured party could use lack of voluntary assent as a defense.
REALIZED GAIN (Indicated Gain): Fair market value minus adjusted cost basis of the property;
REALTOR: A real estate broker holding active membership in a real estate board affiliated with the National Association of Real Estate Boards. An important element of this Association is the R a o‟Code of Ethics, which is used to ensure that the broker acts in the best interests of both e lr ts his or her principal and any third parties.
REBATE LAW: Law that prohibits escrow and title insurance companies from giving rebates or favorable treatment as consideration for the referral of business.
RECAPTURE: The billing to tenants of their pro rata share of increased operating expenses after those expenses have been incurred and paid for by the landlord.
RECASTING: The process of rewriting existing loans, especially where there is a default. The term and interest rate may be adjusted to take pressure off the borrower.
RECEIVER: An independent party appointed by a court to impartially receive, preserve and manage property that is involved in litigation, pending final disposition of the matter before the court.
RECESSED DOCK OR WELL: A below grade truck dock recessed into a building.
RECIPROCAL EASEMENT AGREEMENT: An agreement among the owners (and in some cases major tenants) within a shopping center regarding reciprocal parking and use easements/rights to be enjoyed by owners, tenants, and customers/invitees of the center.
RECOGNIZED GAIN: That portion of the indicated gain which has been recognized by IRS as taxable in this particular transaction. The lesser of (1) indicated gain (2) total other properties received in the exchange.
RECOGNIZED NET LOAN RELIEF: In an exchange loan relieved minus loan assumed minus cash paid, or net loan relief minus cash paid.
RECONVEYANCE DEED: Conveys title to property from a trustee back to the borrower (trustor) upon payment in full of the debt secured by the trust deed.
RECORDING: The noting in a public office of the details of a legal document –such as a deed, mortgage, contract for sale, option or assignment –affecting the title to real estate. When such an instrument is properly recorded, it is considered to be a matter of public record. Legally, that means that all subsequent purchasers are deemed to have constructive knowledge of that information.
RECTANGULAR SURVEY SYSTEM: Also referred to as government survey system, it provides for surveying and describing land by reference to principal meridians and base lines.
Allard Commercial Brokerage –Glossary of Terms Page 68 of 68 RECURRING COSTS: Expenses that the buyer can expect again, year after year, such as property taxes, fire insurance and interest.
RED FLAG: A visual sign or indication of a defect. Something that would warn a reasonably observant person of a potential problem requiring further investigation.
REFINANCE: To obtain a new loan to pay off an existing loan; to pay off one loan with the proceeds from another. Properties are frequently refinanced when interest rates drop and/or the property has appreciated in value. Sometimes, a buyer will purchase a property by way of a contract for deed with the expectation of either selling the property before the balance under the contract for deed becomes due or refinancing at better terms and interest rates than exist at the time the agreement of sale is entered into.
REFORMATION: An action by a court to revise a contract to read as it was intended by the parties to read rather than as stated.
REGRESSION: An appraisal principle that states that, between dissimilar properties, the value of the better-quality property is affected adversely by the presence of the lesser-quality property.
REINSTATE: To bring something back to its prior position, as in restoring a defaulted loan to current status.
REJECTION: Proposing any deviation from the terms of an offer constitutes a rejection of the original offer and becomes a new offer.
RELEASE CLAUSE: A statement contained within the loan documents allowing the borrower to obtain the release of either a specified parcel or a number of non-specified parcels within a specified ae f m tel d r lnu o p y n o ac r i s m o mo e a ac r i t o ra r h e e‟ i p n a me t f et n u f n y t et n i r o n se a a me upon the performance of some other act, as agreed upon by lender and borrower prior to execution of the loan documents. An example of the fashion in which a release clause works might be found in a situation wherein a developer controls a fifteen-acre parcel of land suitable for a shopping center but costs and other considerations prevent him from developing the entire 15 acre parcel at one time. Because he seeks the maximum dollars in his loan, the lender requires that a lien be placed over the entire 15 acres even though the first development phase covers only 10 acres. A release clause included within the loan documents would allow the borrower to obtain release of the remaining 5 acres from the lien of the lender who made the loan on the first phase of development upon either the payment of a certain sum to the lender (as principal reduction) or the execution of some other specified act by the borrower.
RELICTION: Occurs when land that has been covered by water is exposed by the permanent withdrawal of water.
REMAINDER ESTATE: A future interest in real estate created at the same time and by the same instrument as another estate, and limited to arise immediately upon the termination of the prior estate. For example, Hoe Phigg owns a property in fee simple and conveys the property "to Barry Allard Commercial Brokerage –Glossary of Terms Page 69 of 69 Clink and, upon Clink's death, to Cora Quibb and her heirs." Cora Quibb has a remainder estate, which is vested because the estate automatically passes to Cora Quibb and her heirs upon the death of Barry Clink.
REMAINDER INTEREST: The remnant of an estate that has been conveyed to take effect and be enjoyed after the termination of a prior estate, such as when an owner conveys a life estate to one party and the remainder to another.
RENEWAL OPTION: A lease covenant giving the lessee the right to extend the lease for an additional period of years on specified terms.
RENT: A fixed, periodic payment made by a tenant of a property to the owner for possession and use, usually by prior agreement of the parties.
CONTRACT RENT –The rent designated in a lease. The term describes the actual rent paid.
ECONOMIC RENT –The reasonable rental expectancy if the property were available for lease; the rent being paid for comparable space.
RENTABLE AREA: The rentable area includes the usable area plus a prorata portion of common areas on the entire office floor excluding vertical shafts, such as elevators, stairs, mechanical risers, etc. The rentable area of a building is fixed for the like of the building and is not affected by changes in corridor size or configuration.
RENTAL INCOME: The result when vacancies (uncollected rent) is subtracted from gross scheduled income.
RENTAL INCREASE/CPI: Changes in the base rent during the term of the lease. Not to be confused with operating expense, recapture increase or expense billings. Usually tied to the C.P.I. (Consumer Price Index).
RENTAL REQUIREMENT: A condition in the commitment letter which stipulates that a specific number of square feet or a specific number of units must be rented at a specified minimum rental rate if the entire loan amount is to be funded.
RENT UP: A requirement of a lender that a developer lease a stated amount of space in a building as a prerequisite to a permanent lender "taking out" the interim lender.
RENUNCIATION: An act or instance of relinquishing, abandoning, repudiating or sacrificing something, as a right, title, person, etc.
REPLACEMENT COST: The cost of replacing improvements with modern materials and techniques.
Allard Commercial Brokerage –Glossary of Terms Page 70 of 70 REPRODUCTION COST: Cost of replacing the improvements on a property minus allowance for depreciation. Replacement cost.
REQUEST FOR NOTICE: A notice that is sent, upon request, to any parties interested in a trust deed, informing them of a default.
RESCISSION: Legal action taken to cancel, terminate or annul a contract either by mutual consent of the parties or by one party when the other party has breached a contract. Contracts may be rescinded due to mistake, fraud or misrepresentation.
RESERVE FUND: Monies a lender will often require a borrower to set aside as a cushion of capital for future payment of items such as taxes, insurance, furniture replacement and deferred maintenance. Sometimes a reserve fund is referred to as an impound account or customer's trust fund. Replacement reserves should be maintained especially when the owner is installing items having a short life expectancy - for example, appliances, furniture or carpeting in a furnished apartment.
RESIDENTIAL RENTAL PROPERTY: Property from which 80 percent or more of the gross rental income is from dwelling units.
RESTRICTIVE COVENANTS: A clause in a deed that limits the way the real estate ownership may be used.
RETAINING WALL: A wall built to hold back or support a bank of earth.
RETALIATORY EVICTION: An act whereby a landlord evicts a tenant in response to some complaint made by the tenant.
RETROACTIVE LIABILITY: A liability is not limited to the current owner of a property, but includes people who have previously owned the property.
RETURN ON INVESTMENT: The net annual income divided by the original cash investment equals a percentage return on investment.
REVERSE LEVERAGE: A situation wherein the cost of borrowed funds exceeds the return provided by the investment. It is illegal for a landlord to decrease services, increase rent or evict the tenant within 180 days of such a complaint.
REVERSION: The right of future possession and use by the grantor of a life estate.
RIGHT OF FIRST REFUSAL: The right to the first opportunity to lease or purchase real property.
For example, a tenant may have the right of first refusal if the building is going to be marketed for sale.
RIGHT OF PRIOR APPROPRIATION: A water rights concept in California (and other states) that the first user of riparian water obtains priority over subsequent users.
RIGHT OF SURVIVORSHIP: The distinctive characteristics of a joint tenancy (also tenancy by entirety) by which the surviving joint tenant(s) succeeds to all right, title and interest of the deceased joint tenant without the need for probate proceedings.
RIGHT-OF-WAY: An easement giving a person the right to pass over, construct a roadway over, or use as a pathway, the land of another without actually transferring ownership.
RIPARIAN RIGHTS: The rights of a landowner whose land is next to a natural watercourse to reasonable use of whatever water flows past the property provided such use does not injure other riparian owners. Riparian owners own to the middle of a non-navigable river bordering the property line and to the low water mark of a navigable watercourse or lake.
ROLLED ROOFING: An asphalt roofing material that is manufactured in rolls with granules on one side. Asphalt roofing is a relatively inexpensive and short-lived product.
ROLLOVER MORTGAGE: A loan that allows the rewriting of a new loan at the termination of a prior loan.
ROOF DECKING: The under support material for attaching shingles and other materials to the roof. Typically wood.
ROUTINE MAINTENANCE: Includes such day-to-day duties as cleaning common areas, performing minor carpentry and plumbing adjustments and providing regularly schedule upkeep of heating, air conditioning and landscaping.
SAFETY CLAUSE: A safety clause may be contained in a listing. It provides that a broker is still entitled to a commission for a set period of time after the listing has expired if the property is sold to a prospect of the broker introduced to the property during the period of the listing.
SALE-LEASEBACK: A real estate transaction wherein an investor acquires title by purchase and gives contract possession by leasehold to the grantor.
SALES COMPARISON APPROACH: The process of estimating the value of a property by examining and comparing actual sales of comparable properties.
SALES CONTRACT: A real estate sales contract contains the complete agreement between a buyer of a parcel of real estate and the seller. Depending on the area, this agreement may be known as an offer to purchase, a contract of purchase and sale, a purchase agreement, an earnest money agreement or a deposit receipt.
SALESPERSON: Any person who, for a compensation or valuable consideration, is employed either directly or indirectly by a licensed real estate broker to perform certain acts: to sell, offer to Allard Commercial Brokerage –Glossary of Terms Page 72 of 72 sell, buy, offer to buy; negotiate the purchase, sale or exchange of real estate; lease, rent or offer to rent any real estate, or to negotiate leases thereof or improvements thereon.
SANDWICH LEASE: Intermediary instrument in three or more leases on the same property, i.e., A leases to B, B leases to C, C subleases to D; the agreement between B and C would be called a Sandwich Lease. The sandwich party of the lessee of one party and the lessor of another; thus, he or she is neither the fee owner nor the end user of the property.